Lake Turkana clouds the future of wind in Kenya

The battle to connect Kenya’s flagship Lake Turkana wind farm to the grid is again in the news as will now fall to Kenyan consumers to help foot the bit for delays. We first wrote about this “compelling” 310MW scheme in 2013. Is it still so?

The wind farm is near Lake Turkana in northern Kenya, and has been developed by a consortium including KP&P Africa, Aldwych International, Finnfund, Norfund, the Investment Fund for Developing Countries, Sandpiper and Vestas.

The development reached financial close in December 2014 and construction started in 2015.

That year, Google announced that it would acquire a 12.5% stake in the project from Vestas upon completion, which was due in 2017; and Vestas completed installations of 365 of its 850kW turbines in March 2017, two months early. This is where the story stalls. The project is ready to be connected to the grid, the power line is not.

Construction of the 428km transmission line, which would carry wind power from the north to the centre of Kenya, started in November 2015 but it is not complete yet. It is no small feat, given the vagaries of land ownership in rural areas of Kenya, and the need to station guards along the length of the line to stop cables from being stolen.

The project also faced a major setback when its main contractor, Spanish firm Grupo Isolux Corsan, closed due to financial difficulties last year. The Kenyan government assigned then the work to Chinese companies Nari Group Corporation and Power China Guizhou Engineering Company, which are still working on the project. These delays have been affecting investor confidence, and are set to hit consumers too.

In fairness, Kenya’s government has been in talks with the owners. In September, it agreed to pay KES10.3bn (€86m) to the Lake Turkana consortium, setting January 2018 as the new deadline to complete the transmission line. The figure included a KES5.7bn (€48m) fine to be paid by a monthly increase in consumer bills spread across six years; and a KES4.6bn (€38m) payment to a special fund created by the government to cushion Lake Turkana’s investors from losses.

When the contractors failed again to meet the January deadline, energy minister Charles Keter committed to pay an additional KES1bn (€8.3m) if the link was not ready by the end of June. And, last week, the government approved an additional payment of KES960m (€8m) each month to the Lake Turkana consortium, signalling that the June deadline won’t be met, and that consumer bills will need to rise.

But what impact will this have on the development of the wind sector in Kenya?

The situation may not be encouraging for investors – but, then again, a 428km grid link to a project in a remote part of Kenya was always going to be a risk. It’s a good reminder that grid links cannot be taken for granted, especially in new markets.

The Kenyan government has also given other investors cause for optimism. There may be problems with the Lake Turkana link, but it is also making sure that it has a deal in place with the investors to compensate them. That must help confidence.

It is also worth noting that problems with transmission links aren’t insurmountable. In the early days of German offshore wind, for example, there were big problems with TenneT failing to connect projects on time. That is now fading to a distant memory.

The biggest problem we see here is that consumers are now picking up the tab for these delays. These people were promised cheap electricity produced by the wind farm, but they are now facing higher bills because the costs of the continue delays. This has become a reputational issue for the wind industry in Kenya, and will make life harder for developers that might already face opposition over land issues.

Kenya wants 1GW of installed wind farms in the next two years and 3GW by 2030, but sceptical investors and hostile consumers would make that hard to achieve. Last week, Keter set September as the new deadline for getting Lake Turkana connected to the grid. The sooner that happens, the less damage this will cause.